Misguided Growth Goals

Each March in China sees the convening of both the National People's Congress and the National Committee of the Chinese People's Political Consultative Conference, dubbed by the media as 'the two meetings'. Prior to that, provincial governments hold their own 'two meetings' to establish local development targets, which are typically in line with the mood of the 'two meetings' in Beijing.

But the news emerging from these regional meetings has surprised and troubled me. According to reports, among the 31 provincial administrative regions' five-year plans, provinces including Guangxi, Jiangxi, Fujian, Anhui, Shaanxi, Shanxi, Guizhou, Henan and Heilongjiang are expected topresent a goal of doubling GDP. Some provinces have also raised their projected per capita GDP, with an aim of doubling it in five years.

Some analysts predict that if this doubling is realized, the annual GDP growth rate would reach 14.5 percent, which marks a significant departure from the central government's target of limiting the pace of economic growth to 8 percent to 9 percent. In 2010, China's GDP rose 10.3 percent, while the consumer price index (CPI) increased more than 3 percent, figures that have created something of a headache for the the central government.

There’s now a serious debate going on in the media over whether the high growth rate targeted by the local governments runs the risk of overheating the economy, which could in turn lead to rising inflation and potential social problems—and unrest.

Some members of the media have dubbed this high growth approach another Great Leap Forward, reminiscent of the pledge by the Chinese government in the 1960s to catch up with Britain and overtake the United States within 10 years.

In my opinion, whether we’re talking about a Great Leap Forward now or 50 years ago, it’s all about politics—government officials want to show what they’re capable of, and GDP growth is the clearest yardstick available to them.

But focusing on the pace of GDP growth like this misses the point—surely we should be considering whether the growth is sustainable. For example, much of China's GDP growth boils down to 'land politics' and the way real estate is sold, something that isn’t sustainable in the long-run.

When GDP growth exceeds 10 percent, it triggers concerns about inflation among regular citizens who are then forced to worry about basic issues like spiralling property prices and the costs of things like cars, medical care and caring for the elderly. Is this really something that we should be aiming for?